Georgia Conflict Stalls Russia's WTO Bid


Russia 's bid to join the WTO, which was until recently considered on track to be concluded by the end of the year, has stalled following sharp disagreements with the US and the EU over its role in recent conflict in Georgia . Moreover, Moscow is considering pulling back from some of the commitments it has already made in its WTO accession process.

Violence flared earlier this month when Georgian government forces tried to retake the separatist provinces of South Ossetia and Abkhazia. Within twenty-four hours of the Georgian foray into South Ossetia , and with the deaths of Russian peacekeepers, Russia had launched a counter attack. South Ossetia and Abkhazia are two regions seeking to break off from Georgia , a former Soviet republic.

The West has threatened various sanctions to the intervention and continued Russia presence in the area, including vetoing Moscow 's bid to join the WTO, freezing relations with NATO and blocking its membership in the G-8 and the Organisation for Economic Cooperation and Development.

US presidential candidate Senator Barack Obama was among those who called for diplomatic action to be taken against the Kremlin. “We should…convene other international forums to condemn this aggression, to call for an immediate halt to the violence and to review multilateral and bilateral arrangements with Russia — including Russia 's interest in joining the World Trade Organisation,” Obama said.

Similar noises came from the Bush administration: US Commerce Secretary Carlos Gutierrez said in an interview with Germany 's Der Spiegel magazine that Russian military actions in Georgia had put the country's WTO membership in jeopardy.

Russia , by far the largest economy still outside the WTO, has been working to join the global trade forum for nearly 15 years. As recently as earlier this summer, EU Trade Commissioner Peter Mandelson said that he thought that Moscow could potentially finalise the details of its accession package by the end of the year (see BRIDGES Weekly, 27 August 2008 , http://ictsd.net/i/news/bridgesweekly/12267/).

Indeed, Russia has made significant progress in its accession talks, having already concluded bilateral negotiations on goods and services with nearly all of the WTO Members who requested such negotiations, including all of Russia 's major trading partners. All applicants for Membership in the global trade body must negotiate bilateral accords with any WTO Member that requests one. The only bilateral talks that remain unresolved are the negotiations with two former Soviet republics, Ukraine and Georgia . Under the WTO's rules for consensus decision-making, the process by which all accession bids are considered, each of the organisation's 153 Members has the power to veto Russian accession.

But some of that progress may soon be lost. Russian Prime Minister Vladimir Putin indicated in August that Moscow might pull out of some of the trade commitments it had made as part of its accession bid.

“We propose continuing negotiations within the framework of the Working Party on WTO accession, but informing our partners of the need to exit some agreements which currently oppose the interests of the Russian Federation ,” Putin said, according to Russian news agencies.

“We don't feel or see any advantages from membership, if they exist at all. But we are carrying the burden,” he said. “We need to make this clear to our partners.”

That threat was followed by an official announcement on 27 August that the Kremlin planned to both increase agricultural subsidies and cut import quotas for US poultry and meat. Indeed, Russian Agriculture Minister Alexei Gordeyev said that Moscow would reduce quotas for those products by “not tens but hundreds of thousands of tons.”

Such a move would violate an agreement brokered between Moscow and Washington in 2005, under which US poultry and meat producers are allowed reduced tariffs on a specified quantity of exports to Russia . When that deal was struck, many considered it a critical step towards Russian accession to the WTO.

But Maxim Medvedkov, the head of Russian accession talks, offered some reassuring words in an official statement released on 2 September. “We don't plan to break any agreement,” he said. “The case in point is to revise individual agreements and only in case if they couldn't be changed Russia could break them off. In this case, as in the situation with any other agreement, we'll start consultations and only after them we can decide on further action. These agreements would be changed only if the implementation of these commitments is uncomfortable for Russia .”

Any backward movement from Moscow would not sit well with its trading partners.

“If Russia decides to step back from those…commitments, that will obviously further delay its aspirations to join the WTO,” US Trade Representative spokesman Sean Spicer said, as reported by The Wall Street Journal.

Relations between Russia and the EU are also strained: the two major trading partners continue to dispute several issues, including timber tariffs, a Russian ban on imports of some European meat, and the regulation of state-owned enterprises such as Gazprom. But despite the ongoing differences, Brussels has publicly urged the Kremlin to continue to pursue its WTO Membership.

“As the only major economy outside the WTO, it should hasten its efforts to join,” said Peter Power, spokesman for the European commission on trade affairs in a press release.

Like the US , the 27-member EU is reportedly considering threatening to veto Russia 's bid to join the WTO in order to pressure the country to pull its troops out of Georgia . But even if Western nations do not follow through on that threat, Georgia itself, which has been a Member of the WTO since 2000, would almost certainly veto Moscow 's bid.

Georgia had previously maintained that it would not finalise WTO negotiations until Russia establishes functioning customs controls on its border with Abkhazia and South Ossetia . This demand seems increasingly unlikely to be met, especially in light of the formal recognition of independence that Russia granted to Abkhazia and South Ossetia last week.

At this point, the future of the Russia 's bid remains uncertain. While accession talks are set to resume in mid September, analysts consider it unlikely that all of the outstanding issues will be resolved in the near future. Indeed, some experts say that, with hundreds of billions of dollars in reserves thanks to high oil prices, Moscow has decided the time is right for Russia to reassert its power in the region.